LIC’s June Quarter Performance Driven by Efficiency Gains

Life Insurance Corporation of India (LICI) printed a beat on Annual Premium Equivalent (APE) growth (+9% YoY), led by group business growth (+16% YoY). Value of New Business (VNB) grew 21% YoY as VNB margins clocked in at 15.4% (+150bps YoY). This was better than expectations. It was driven by efficiency gains.

Traditionally focused on the mass customer segment, LICI has engineered a shift in its product strategy towards higher sum-assured, non-PAR (non-participatory) policies over the past couple of years (In FY 25 non-PAR policies made 28% of new business).

LICI derives its moats or competitive advantages from a large agency network. It is undergoing a strategic shift in its individual product proposition to align itself to the new surrender guidelines (implemented from Oct-24).

We maintain our APE/VoNB  (Annual Premium Equivalent/ Value of New Business) CAGR of 3/4 % over FY25-FY27E. We expect VNB margins for FY26E to remain flat and expand gradually to 18.1% by FY27E with an upside revision bias. We maintain RoEV (Return on Embedded value) of 9.8% for FY26/27E. This, primarily on account of the unwinding and VNB. We maintain our ADD rating and a Target Price (TP) of INR1,040 (0.7x Mar-27 EV).

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Source: HDFC Securities Institutional Equities

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